When you go to rent a car, you're usually offered a collision damage waiver (CDW) and liability insurance policy by the car rental agency. You may not want to spend the extra money, especially for redundant insurance coverage from your personal car insurance policy. If you don't buy the coverage, you may also wonder if you are properly protected. Should you make the gamble?
The short answer is you don't always need to buy the extra insurance offered when you rent a car but there are some important things to consider. Let's help sort it out so you can enjoy your vacation or business trip without any worry or regrets.
Does your car insurance cover a rental car?
The first thing you should know is the same collision coverage and liability coverage you have on your car insurance policy can automatically extend to your rental car and the drivers listed on your policy. There are still really good reasons to buy the extra insurance that the car rental company offers rather than relying on your personal car insurance.
What happens if you have an accident in a rental car using your own car insurance?
If you have an accident in a rented vehicle with only your car insurance, there are a few things you need to know:
If the accident is not your fault
- If your rental car was damaged due to another driver’s negligence, the other driver’s insurance company can pay your rental car costs for a reasonable length of repair time.
- If your rental car is totaled, many car rental companies will pay for your rental as a courtesy, but they are not required to.
- If an uninsured driver caused the accident, then your insurance company can pay for damage to your vehicle if you have collision coverage or uninsured motorist property damage. If your damage is repaired under your collision coverage — be aware you will still have to pay a deductible.
If the accident is your fault
- You will have to pay your car insurance deductible
- You will have the headache and stress of the claim
- You may use up any accident forgiveness on your personal car insurance policy
- An accident filed with your insurance company can cause your rates to rise
- There is no coverage on your insurance for the amount of money the rental agency could have made renting that vehicle. Essentially you are still "renting" the car while it is being repaired. This can add up quickly into the hundreds, if not thousands of dollars. You can avoid that expense by purchasing the extra collision damage waiver from the car rental agency.
- The cost of a replacement rental car will only be covered if you paid a premium to include rental reimbursement coverage in your personal car insurance policy and most polices have a dollar limit for rental payments. Check your policy — if your current policy doesn’t offer coverage for a rental car, see if an insurance rider can be added for a small fee.
Reasons to buy the collision damage waiver (CDW) and liability insurance on a car rental
If you lack personal auto insurance, or don't own a car, you can check your credit card perks or purchase the liability insurance and collision damage waiver at the car rental counter. Even with personal car insurance, here are a few more questions that can help you find out if it makes more sense to buy the extra car rental insurance.
- Is the rental car worth more than the car listed on your policy? Say you drive a Toyota Corolla and you decide to rent a Corvette. The coverage for your Corolla is probably not going to cover a claim on the Corvette in the event there's a total loss- the Corvette is most likely more valuable. So, if you're renting a luxury car, it's usually better to purchase the extra coverage offered through the car rental company. Ask the car rental company for the monetary value of the car you're renting or use Kelley Blue Book to look it up yourself.
- What are your out-of-pocket expenses? As we said, the same coverages from your car insurance can extend to your rental car, including limits and deductibles. An insurance limit is the maximum amount of money the insurance company agrees to pay for a covered loss. Your deductible is what you agreed to pay out-of-pocket with each claim. If those exceed the expense of the rental policy, it might be better to opt for the extra rental coverage. More on this in #3. Be sure to read the fine print on the rental car company's insurance policy and refer to your licensed independent agent for sound advice.
- How long is your vacation? A longer term car rental can influence purchasing rental insurance with the car rental company. Remember, the same deductibles from your personal auto policy also apply to the rental. For example, let's say you have a $1,000 deductible under collision coverage on your personal auto policy and you hit a pole in the rental car. The portion you pay on that claim is $1,000. Typically, you can purchase the CDW (Collision Damage Waiver) from the rental car service for around $10-$20 per day. So, purchasing the waiver for a 7-day trip is definitely more cost effective than paying a $1,000 if you have a collision claim. Again, just make sure you read all the fine print.
- Are you using coverage as a credit card perk? Sometimes you can use credit card points to pay for a car rental. That may also include insurance coverage for the rental that covers damage or theft of the rental car. Contact your insurance agent as well as your credit card company before signing that rental contract and call the phone number on the back of your card. There are a few more things you ought to pay attention to:
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- Read the fine print. You should be sure you know what coverage you have and when it applies to your rental. For example, the driver of the car usually must be an authorized user on the credit card account with the benefit. Otherwise, a claim that occurs while an unauthorized person is driving may not be covered. Also, credit card providers may exclude coverage for certain types of rental vehicles.
- Know when your coverage. Coverage that most credit cards offer only kicks in after your personal auto insurance pays. But that so-called secondary coverage can be valuable. Perhaps most important, it could reimburse you for your auto insurance deductible, which might be as high as $1,000.
- You have to use the card to pay. You may only get the coverage if you use that credit card to pay for the rental.
We hope these questions help you determine the best decision for you when renting a car. Contact your local Northern Neck independent insurance agent to ask specific questions about your car insurance coverage. If you don't have car insurance through NNINS, consult your own insurance carrier for how your car insurance policy works with rental car coverage.
Learn more about car insurance in Virginia
THE NORTHERN NECK INSURANCE INTEGRITY PROMISE — We pledge to provide straight talk and good counsel from our NNINS Virginia insurance experts through our blog. While we hope you find this to be a helpful source of information, it does not replace the guidance of a licensed insurance professional, nor does it modify the terms of your Northern Neck Insurance policy in any way. All insurance products are governed by the terms in the applicable insurance policy.
